The semiconductor and chip sector continues its strong performance today (June 30). In the Hong Kong hard technology space, Knowledge Atlas surged 10%, Huaqin Technology gained over 8%, ASMPT rose more than 6%, Shenghong Technology and Biren Technology advanced over 5%, while SMIC climbed more than 4%. The largest and most liquid* ETF of its kind, the Hong Kong Stock Connect Information Technology ETF Huabao (159131), briefly rose 2% intraday and is currently up 1.83%. On the fund flow front, capital has been continuously added over the past 5 trading days, resulting in a cumulative net inflow exceeding 5.7 billion yuan.

Analyzing the Recent Volatility in the AI Tech Sector

Regarding the recent volatile swings in the AI technology sector, analysis suggests it is clear that, whether from a liquidity or industry trend perspective, it is premature to discuss the "AI computing power rally peaking." If subsequent industry signals can make the market realize that new SOTA models or Agent products can effectively leverage incremental market demand and broaden the boundaries of AI commercialization, then investor doubts about the sustainability of CSP capital expenditure could be pushed further back. The current disagreements would then resemble the situation in the fourth quarter of last year, turning out to be a false alarm.

Identifying Opportunities Amidst Short-Term Uncertainties

With the aforementioned AI debates unlikely to be resolved in the short term, what opportunities are worth seizing?

First, domestic computing power and its upstream foundry, equipment, and materials sectors. This is driven by the acceleration of the domestic AI industry chain's commercialization. This year marks the starting point for closing the loop between "domestic models and domestic computing power," with accelerated construction of domestic computing clusters leading to a qualitative change in the industry. Secondly, under the demand for sovereign AI construction, the entire AI industry chain is accelerating its localization. Geopolitical instability is forcing the logic of chip manufacturing localization to extend from US and European equipment to upstream materials and precision components monopolized by Japanese companies, presenting supply chain restructuring opportunities for related segments. The strategic nature and long-term certainty of the above factors mean the domestic supply line is less sensitive to immediate earnings performance, and valuation constraints are relatively smaller due to the existence of a survival premium.

Second, upstream materials within the computing power chain where the supply-demand gap is difficult to narrow in the medium term. The "computing power inflation" theme has been actively playing out recently, including areas like memory, optical fiber and preforms, MLCCs, PCB upstream materials, and equipment consumables. Semiconductor segments like silicon wafers, targets, and electronic special gases share similar attributes. The market is currently trading on the expectation that "supply release clearly cannot catch up with demand growth" for these sub-sectors. Compared to the long-term demand narrative for computing power, the core driver of the rally is the expectation of their own price trend changes, i.e., the dynamic shifts in supply-demand dynamics. If supply remains tight and prices continue to be bullish, it is premature to call a peak. What can break the positive cycle of stock prices is often a weakening of the medium-term supply-demand balance. Therefore, industry expansion actions and capacity release progress need close tracking. Where tight expectations persist or even strengthen, a continued positive outlook is warranted.

Performance Divergence Within Hong Kong Tech

Looking at the past six months' performance, a stark divergence has emerged within the Hong Kong technology sector. The underlying index of the Hong Kong Stock Connect Information Technology ETF Huabao (159131), which focuses on Hong Kong hard tech—the CSI Hong Kong Stock Connect Information Technology Composite Index—has accumulated a gain of 25.75%. This outperforms the Hang Seng Tech Index by 48%, the Hong Kong Stock Connect Technology Index by 43%, and the Hong Kong Stock Connect Internet Index by over 61%, demonstrating significantly sharper and more elastic performance.

Statistical period: Dec 29, 2025 - Jun 29, 2026. The historical annual returns for the Hong Kong Stock Connect Information C Index from 2021 to 2025 were: -9.54%, -34.47%, -0.25%, 21.58%, 39.30% respectively. The index's annual volatility from 2021 to 2025 was: 4.13%, 4.63%, 3.40%, 5.49%, 5.45% respectively. Past index performance is not indicative of future results.

A Rare "Pure" Hard Tech Play in Hong Kong

A rare "pure-blooded" hard tech offering in Hong Kong! Supports T+0 trading! The first ETF of its kind in the entire market, the largest and most liquid Hong Kong Stock Connect Information Technology ETF Huabao (159131), with its feeder fund code 026755. Its underlying index is composed of "80% hardware + 20% software," heavily weighted towards Hong Kong's "semiconductors + electronics + computer software" sectors. It covers 60 Hong Kong-listed hard tech companies. Among them, the combined weight of the two wafer fabrication giants, SMIC and Huahong Grace, exceeds 26%. The domestic AI PC leader, Lenovo Group, has a weight over 10%. The PCB leaders, Kingboard Holdings and Kingboard Laminates, have a combined weight over 11%. These three holdings represent the highest concentration in any market index with linked products. Furthermore, the index recently included several Hong Kong hard tech newcomers like Knowledge Atlas, Biren Technology, and Shenghong Technology in its latest review on June 15th. The constituent stocks exclude large-cap internet enterprises like Alibaba, Tencent, and Meituan, resulting in higher sharpness and making it easier to capture the Hong Kong AI hard tech rally.

Data source: CSI Indexes, as of Jun 24, 2026.

Note: "First in the entire market" refers to the Hong Kong Stock Connect Information Technology ETF Huabao being the first ETF tracking the CSI Hong Kong Stock Connect Information Technology Composite Index. As of Jun 26, 2026, the ETF's latest on-exchange scale is 18.87 billion yuan, the largest among the 8 ETFs tracking the same index. Its year-to-date average daily turnover is 659 million yuan. The underlying CSI Hong Kong Stock Connect Information Technology Composite Index (HKD) had historical annual returns from 2021 to 2025 of: -9.54%, -34.47%, -0.25%, 21.58%, 39.30% respectively. Past index performance is not indicative of future results.

Fund Fee Information

Subscription and redemption agents for the Hong Kong Stock Connect Information Technology ETF Huabao may charge a commission of up to 0.5%. On-exchange trading fees are subject to the rates actually charged by securities firms. No sales service fee is charged.

Risk Disclosure

The Hong Kong Stock Connect Information Technology ETF Huabao and its feeder fund passively track the CSI Hong Kong Stock Connect Information Technology Composite Index. The index base date is Nov 14, 2014, and it was launched on Jun 23, 2017. Index constituents mentioned in the material are for illustrative purposes only. Descriptions of individual stocks do not constitute investment advice in any form, nor do they represent the holdings or trading动向 of any fund managed by the asset manager. This product is issued and managed by Huabao Fund. Distributors do not bear responsibility for the product's investment or redemption. Investors should carefully read the Fund Contract, Prospectus, Fund Product Key Facts Statement, and other legal documents to understand the fund's risk-return characteristics and choose a product suitable for their own risk tolerance. Past fund performance is not indicative of future results. The performance of other funds managed by the fund manager does not guarantee the performance of this fund. Fund investment carries risks and requires caution! The fund manager assesses this fund's risk等级 as R4 - Medium to High Risk, suitable for Aggressive (C4) and above investors. Distributors (including the fund manager's direct sales channels and other distributors) conduct risk assessments of this fund according to relevant laws and regulations. Investors should promptly pay attention to the appropriateness opinions issued by distributors and base their decisions on the matching results. Appropriateness opinions from different distributors may not necessarily be consistent, and the fund product risk等级 evaluation results issued by fund distributors shall not be lower than the risk等级 evaluation results made by the fund manager. There may be differences between the fund's risk-return characteristics described in the fund contract and its risk等级 due to different consideration factors. Investors should understand the fund's risk-return profile and choose fund products cautiously based on their own investment objectives, horizon, experience, and risk承受能力, bearing the risks themselves. The China Securities Regulatory Commission's registration of this fund does not indicate a substantive judgment or guarantee of its investment value, market prospects, or returns. Funds carry risks; investment requires caution.